• by August 9, 2000

One day before the Internet Advertising Bureau announced that online ad spending is en route to reaching $2 billion a quarter (yesterday's Minute), Advertising Age reported that according to a recent study by Pegasus Research International, Internet companies targeting the consumer market have slashed their sales and marketing spending by more than 25% from the fourth quarter of last year.

The study found that dot-com operations cut their sales and marketing outlays in the second quarter to 69 cents for every revenue dollar. That was down from 94 cents in the last year's heady holiday period.

Greg Kyle, president and CEO of Pegasus Research was quoted saying that the days of spending 100% to 400% of revenues on sales and marketing are gone and that dot-com spending on marketing, advertising and sales will fall further, to the 25 to 40% of revenues range, by 2002.

The study covered 75 companies in four sectors of the online business-to-consumer market: retail, content, financial services and access.

Ad Age said that in addition to cost-cutting following the spring slide in technology stocks, the decline in second- quarter spending was attributable to seasonality and "maturing of the top-tier dot-coms."

Bradley Johnson, Advertising Age's interactive editor, said the study demonstrates that many dot-coms have reacted to the spring tech stock crash by "abandoning their free-spending ways and adopting a somewhat more rational approach to marketing." Additionally, he said, most dot-coms must make even bigger cuts if they have hopes of ever reaching profitability."